Wall Street rises as soft inflation data fuels rate cut hopes

The three major US stock indices rose by nearly 0.30% on Wednesday, rebounding from a weaker open as investors digested softer-than-expected consumer inflation data and monitored the latest developments in US-China trade relations. All key inflation measures undershot forecasts, indicating that the impact of President Trump’s tariffs has yet to filter through to consumers. This may be due to the temporary suspension of the most punitive levies or because businesses are still absorbing the additional costs. The data bolstered expectations that the Federal Reserve may cut interest rates twice this year.

In South Africa, the rand was little changed on Wednesday following the parliamentary approval of long-delayed budget legislation, which establishes the government’s overall spending limits and outlines revenue-generating measures. The vote ends months of delay due to coalition disagreements and brings greater clarity to the country’s fiscal outlook. By 16h15 GMT, the rand traded at 17.6925 against the US dollar, around 0.10% stronger than Tuesday’s close. The Johannesburg Stock Exchange’s Top-40 Index closed down 0.40%, while the yield on the benchmark 2035 government bond rose by 3 basis points to 10.10%.

In the United Kingdom, the FTSE 100 climbed towards record highs near 8 870 as markets reacted to the UK government’s multi-year spending review and encouraging news on US-China trade talks. Chancellor Rachel Reeves presented departmental budgets extending through 2027, which include a pledge to increase defence spending to 2.50% of GDP and allocate an additional £30 billion to the NHS. Sentiment was further boosted by reports that the latest US-China trade deal would likely gain the approval of both President Trump and President Xi.

Across Europe, the mood was more subdued. The STOXX 50 declined by 1%, while the broader STOXX 600 slipped 0.30% as markets responded to mixed signals on global trade. Although President Trump announced a framework agreement with China involving rare earth supply guarantees and broader access for Chinese students to US universities, European officials expressed scepticism about their own trade negotiations with Washington. They cautioned that talks may drag on past the 9 July deadline, with only a preliminary agreement likely by that time.

In Asia, Japanese equities extended their rally, supported by improving trade sentiment. The Nikkei 225 rose 0.55% to close at 38 421, while the broader Topix Index edged up 0.09% to 2 789. It marked the fourth consecutive session of gains for Japanese shares, buoyed by optimism over progress in US-China negotiations.

Chinese markets also regained ground. The Shanghai Composite rose 0.52% to 3 402 and the Shenzhen Component advanced 0.83% to 10 246, reversing losses from the previous session. Markets were lifted by news that officials from both countries had reached a framework agreement in London to implement the Geneva consensus. The deal, reportedly aligning with commitments made during a recent call between Presidents Trump and Xi, includes expectations that China will ease restrictions on rare earth exports, while the US may relax curbs on advanced technology sales to China.

In commodity markets, WTI crude oil futures climbed above $66 per barrel, the highest level in ten weeks, supported by optimism over the trade talks and renewed geopolitical tensions between the US and Iran. Gold prices also strengthened, rising above $3 330 per ounce after gaining as much as 1% earlier in the session. The rally was driven by subdued US inflation figures, which reinforced expectations that the Federal Reserve could begin cutting rates as early as September.